What is the definition of “success” in a business litigation? This is the first question a litigator should ask their client in the initial meeting. In some cases, there are business goals that go beyond dollars and cents. However, in most cases, businesses will define success by comparing the aggregate cost to either the total recovery (if a plaintiff) or the reasonable exposure (if a defendant). The expense of modern day litigation mandates that a business litigator not only provide a forecast for various stages of a commercial case but also consider proactive strategies for managing expenses. Many companies also seek modified fee arrangements including flat fees, capped fees and structures that provide an incentive for both success on the merits and in controlling expenses. The growth of litigation funding has added more spice to the recipe. In this environment, fee-shifting strategies take on added importance and should be considered early and often in appropriate cases.
This article examines fee-shifting options in the context of the American Rule in which parties presumptively pay their own fees regardless of the outcome, including the offer of judgment rules under FRCP 68 and CPLR 3220. Many of these opportunities are misunderstood and underutilized. In doing this analysis, it is helpful to begin with an overview of the historical background for fee-shifting in the United States.
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